FDI Strategic Weekly Analysis - 31 October 2012
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31 October 2012 | Vol. 3, № 38 From the Editor’s Desk Dear FDI supporters, This week we will release a Feature Interview with Doctor Claude Rakisits, Welcome to this week’s edition of the titled Pakistan, Afghanistan and the Strategic Weekly Analysis. Future. The interview will consider the Late last week, members of FDI attended future trajectories of both states and a reception at the home of the Japanese potential implications for Australia. Consul General. It was held in honour of Other Indian Ocean papers to be released Vice Admiral Hideaki Kaneda, JMSDF over the coming weeks include (ret.), and organised in co-operation with examinations of British, Turkish and South the Curtin University and the Department African policy in the region. of Foreign Affairs and Trade. Discussions focussed on trilateral relations between Additionally, the Energy Security Australia, Japan and the United States. programme will publish a paper exploring Vice Admiral Kaneda particularly the role of organised crime in the oil promoted maritime security co-operation sector. to meet changing power dynamics in the I trust that you will enjoy this edition of Indo-Pacific. the Strategic Weekly Analysis. Also last week, coinciding with the fiftieth anniversary of the Sino-Indian Conflict, Major General John Hartley AO (Retd) Institute Director and CEO the Indian Ocean programme released a Future Directions International Strategic Analysis Paper by FDI Visiting Fellow, Balaji Chandramohan. Exploring the likelihood of conflict between the two regional states, the paper encourages Indian policy makers to adopt a more vigorous use of realpolitik. ***** India: New Foreign Minister to Pursue Closer Relations with Pakistan and China India’s relations with Pakistan, China and the United States will receive further attention under new External Affairs Minister Salman Khurshid, whose approach may also benefit Australia. Background The new Indian External Affairs Minister, Salman Khurshid, was appointed on 28 October in a Cabinet reshuffle aimed at rejuvenating a tired government ahead of the general election in 2014. He has signalled his intention to focus on improved relations with Pakistan and China. Comment Prime Minister Dr Manmohan Singh replaced outgoing External Affairs Minister S.M. Krishna with Law Minister Salman Khurshid in a Cabinet reshuffle following the resignation and retirement of seven ministers. The change also served to consolidate the Congress party’s position at the expense of former coalition partner the Trinamool Congress. It was a shrewd move, as Mr Khurshid is widely respected as a charming and capable individual and a liberal at heart. His background is certainly impeccable: his grandfather, Dr Zakir Hussain, was the third President of India and the first Muslim to hold that position. His father, Khurshed Alam Khan, also held the post of External Affairs Minister. Mr Khurshid himself is not without his own experience in the External Affairs Ministry, having held the post of Minister of State from 1993-96. Speaking after his swearing-in ceremony, Mr Khurshid highlighted relations with Pakistan and China as priorities, having previously spoken of the need for India to normalise relations with its neighbours. He will be quickly called upon to put his ambition into practice, hosting Bangladeshi Opposition leader Khaleda Zia on 30 October and the twelfth Council of the Indian Ocean Rim Association for Regional Co-operation (IOR-ARC) Foreign Ministers on 1-2 November. Mr Khurshid recognises the interlinked nature of Sino-Indian relations and that India has the ability, in part due to the rapport between Mr Krishna and Pakistani Foreign Minister Hina Rabbani Khar, to keep moving the Indo-Pakistani relationship forward. As the Business Standard noted, in relations with the United States Mr Khurshid will be at ease dealing with either the Democratic Party or the Republicans, but his own liberal background may position him a little more closely to a second Obama Administration.1 Links with Washington are unlikely to cool therefore and, together with the desire for closer relations with Beijing, may bring a need for even more dextrous juggling of the two in New Delhi. Mr Khurshid’s background should also position him equally well for his dealings with 1Malhotra, J., ‘Khurshid returns 'home', has his work cut out’, Business Standard, 29 October 2012. Page 2 of 10 Australia, as Canberra prepares to implement its Australia in the Asian Century blueprint for deeper relations with India. Leighton G. Luke Research Manager Indian Ocean Research Programme [email protected] ***** UAE to Develop Farmland in Serbia as Part of Food Security Strategy A development contract with Serbia will assist the food security of the import-dependent Gulf state and help build its resistance to global food prices. Background The United Arab Emirates relies on imports to feed its population. Faced with a shortage of arable land and water, it is looking overseas to secure its food supply. A new agreement between the Emirates and Serbia aims to secure food for the former, while providing much needed agricultural investment for the latter. Comment The UAE has taken a further step to ensure the food security of its growing population, by investing in farmland in Eastern Europe. Abu Dhabi's Al Dahra Agricultural Company recently signed an agreement to develop 9,000 hectares of land in Serbia, with the aim of producing a range of crops, meat and dairy produce. The arrangement allows Al Dahra to export produce directly to the UAE, utilising a Serbian port on the Danube River as a logistical centre. Domestic food production in the Emirates is not sufficient to satisfy demand. The diversification of food supplies is an active move by the government to reduce its vulnerability to food supply shocks. The UAE has the 11th largest population of the MENA region, yet is its second largest importer of food, with imports making up around 85 per cent of the total food consumed. The dependence on food imports makes the country highly susceptible to global food price increases, which constitute a large factor in the county’s food insecurity. In return for making available agricultural land to the UAE, Serbia will benefit economically; funding from the project will go towards modernising its irrigation and canal networks. Serbia is a major producer of wheat and maize, both important components in the average Emirati diet. Agriculture accounts for around 12 per cent of Serbia’s economy, though in Page 3 of 10 many areas it is under-resourced. Agreements such as this will allow Serbia, which in recent years has experienced negative growth and consistent budget deficits, to capitalise on its valuable land in exchange for much needed foreign investment. According to economists at the OECD, global food prices are likely to remain relatively high until at least 2020. Countries that are dependent on food imports, therefore, must secure alternative forms of food supply that minimise the impact of price increases on its citizens. The contract between the UAE and Serbia is the second European investment made by the Emirates, both with the purpose of ensuring its future food security. The new agreement is also part of a growing worldwide trend by developed countries to exploit under-used and under-productive farmland, particularly in Central and Eastern Europe, former Soviet states and the countries of Africa. Jay Vella Research Analyst Global Food and Water Research Programme [email protected] ***** Caution Required in Woodside’s Mediterranean Jaunt Border delineation, threats to critical infrastructure and poor regional security architecture could threaten Woodside Petroleum’s expansion in waters off the coast of Israel. Background As part of Woodside’s overseas growth, the Perth-based hydrocarbon producer has sought opportunities in the Leviathan field, located within Israeli waters. Security and political concerns will feature prominently in any future development plans. Comment In late October, as part of Woodside Petroleum’s continued off-shore focus, chief executive Peter Coleman met with Israeli Prime Minister Benjamin Netanyahu, for talks focussed on the development of the offshore Leviathan field. The West Australian-based hydrocarbon producer should, however, exercise a degree of caution. Although holding great potential, reserves in the Mediterranean may be constrained by a number of unresolved issues, including: border delineation; provision of critical infrastructure; and poor regional security architecture. Exploration by Woodside and other hydrocarbon producers has accentuated on-going maritime disputes in the eastern Mediterranean. The land border between Israel and Lebanon was demarcated by the UN in 2000, after the withdrawal of Israeli troops from southern Lebanon. Although not officially endorsed by the UN, Israel has extended this demarcation into the sea and has deployed a series of buoys in the Mediterranean. Beirut Page 4 of 10 strongly rejects this extension and has appealed to the UN to resolve the issue. Iran has also provided support to the Lebanese objections, with its usual rhetoric. Elsewhere, concern also exists over potential Egyptian claims. The foreign policy intentions of Mohamed Morsi’s Government remain unclear. Poor economic outcomes may lead to declining support and an end to post-revolutionary euphoria. This may result in the government seeking to tackle emotive issues, such as Israel. Long pipelines will be required to transport oil and gas to potential destinations in the European Union. Yet this raises significant dilemmas; Israel has no official diplomatic ties with Lebanon and its relations with Egypt have become tense. Relations with Cairo may continue to deteriorate as a more participatory political system leads to the growth of Islamist-inspired parties. Another trend is causing similar concerns; in recent years Jerusalem’s traditional ally in the region, Turkey, has shifted from support of Israel towards Lebanon and, as a matter of particular concern, Iran. Perhaps unlikely, but never to be discounted in the Middle East, energy terrorism will also feature highly in Woodside’s concerns.